brazil - taxand

BRAZIL

1TAXAND GLOBAL GUIDE TO M&A TAX 2021

1. INTRODUCTIONa. Forms of Legal Entity

There are several types of legal entities in Brazil, the most common ones being the Limited Liability Company (“Limitada” or “Ltda.”) and the Corporation (“Sociedade Anônima” or “S/A”). Both types of entities used to require at least two shareholders. More recently, the Brazilian Civil Code was amended to allow the incorporation of Limitadas with one or more quotaholders.

Apart from the entities mentioned above, there are also the “Limited Liability Individual” entities (“EIRELI”), which are established by one individual or legal entity. The EIRELI is different from the Limitada with a single quotaholder because the later does not require a minimum capital (equivalent to BRL 104,500 / approximately USD 19,5931).

Lastly, there is also a “Silent Partnership” entity (“SCP”), which has no legal relevancy on its own and is formed by the ostensible partner, who is responsible for performing the activities of the SCP, and the silent partner, who is not visible to third parties.

Brazilian legal entities incorporated under any of these forms are normally subject to the same domestic tax treatment2. However, there may be differences regarding the application of tax rates and/or tax calculation bases, depending on the tax regime adopted by each of these entities.

Limited liability entities are more commonly used, as they are usually straightforward to incorporate, requiring less formalities if compared to Corporations.

Non-resident entities investing in Brazil must register with the Brazilian Central Bank and obtain a Brazilian taxpayers code - Federal Taxpayers’ Registry for Corporate Entities (Cadastro Nacional de Pessoa Jurídica – CNPJ/MF). In addition, foreign shareholders must have a Brazilian legal representative.

As indicated previously, Limitadas do not require a minimum capital, except in a few specific cases (e.g. when a foreign individual is appointed as the company’s legal representative).

b. Taxes, Tax Rates

Brazilian taxes can be imposed at the Federal, State and Municipal levels. The most common taxes are the following:

i Federal Taxes/Contributions:

Corporate Income Taxes – CIT:

• Corporate Income Tax (Imposto de Renda de Pessoa Jurídica - “IRPJ”: levied at a nominal 15% rate, plus a surcharge of 10% on annual taxable income exceeding BRL 240 thousand; and

• Social Contribution on Net Income (Contribuição sobre o Lucro Líquido - “CSLL”): levied at a nominal 9% rate.

• The combined nominal CIT rate in Brazil is 34%.

• Taxpayers may opt between two different regimes for CIT calculation (depending on certain requirements and specificities): i) the Actual Profits Method – Lucro Real; and ii) the Presumed Profits Method –“Lucro Presumido”.

TAXAND GLOBAL GUIDE TO M&A TAX 2021 2

BRAZIL

• Under the Actual Profit Method, the IRPJ/CSLL computation can be performed on an annual or quarterly basis, at the election of the taxpayer. The calculation basis considers the book results before income taxes and certain adjustments (add-backs and deductions) according to the relevant legislation (e.g. unnecessary expenses, such as fines, which may be considered as a non-deducible expenses for CIT purposes). This regime allows the use of tax losses (carried forward indefinitely) up to 30% of the taxable profit generated in a given year. Non-operational tax losses must be offset only with non-operational taxable gains (the 30% limitation also applies).

• The Presumed Profits Method is calculated on a quarterly basis and corresponds to different percentages applied over the company’s gross revenues. These percentages are established according to the type of activity developed by the company (e.g. 8% for IRPJ and 12% for CSLL in the sale of goods, and 32% for both IRPJ and CSLL on the rendering of services. Companies under the Presumed Profits Method cannot have annual gross revenues, earned in the previous taxable year, above BRL 78,000,000 (approximately USD 14.6 Million).

• The Employees’ Profit Participation Program (“PIS”) and the Contribution for Social Security Financing (“Cofins”) are levied on monthly gross revenues, as follows:

• Under the non-cumulative method: combined tax rate of 9.25%, with the possibility to register PIS and Cofins credits on the acquisition of inputs (goods and services), subject to certain requirements stated in the legislation. These credits can be offset against PIS/Cofins due on subject transactions, or against other Federal taxes;

• Under the cumulative method: combined tax rate of 3.65%, without the possibility to register and use credits on the acquisition of inputs.

• PIS and Cofins are also levied on financial revenue (only under the non-cumulative method) at the combined rate of 4.65%, with a few exceptions (hedge revenues are subject to a 0% PIS and Cofins rate).

• Lastly, these taxes are also levied upon the importation of goods and services, at the combined rates of 9.25% (imported services) and 11.75% (imported goods).

• Contribution for Intervention in the Economic Domain (“CIDE”): levied on payments, credits, use or remittances made by a Brazilian source for royalties, license and technical services provided by non-residents. The CIDE is applied at a 10% rate on the amount credited / paid. This tax is normally deductible for Brazilian CIT purposes.

• Tax on Financial Transactions (“IOF”): levied on foreign exchange transactions, on loans, credit operations and securities transactions. Tax rates vary according to the transaction considered. Foreign exchange transactions are subject to a standard 0.38% rate, but there are other specific rates stated in the Brazilian legislation.

• Withholding Income Tax (“IRRF”): levied on payment, credit, use and remittance of various funds, such as interest, services fees and royalties. The general tax rate is 15% (increased to 25% if recipient is located in a tax haven jurisdiction, for Brazilian tax purposes). The IRRF is due by the non-resident beneficiary, and withheld by the Brazilian paying source. Double Tax Treaties – DTTs signed between Brazil and other countries may limit the IRRF rate on certain remittances. The application of DTTs would need to be analysed in view of specific situations and circumstances.


BRAZIL

• Federal Excise Tax (“IPI”): levied on the manufacturer of goods at the time of sale, or on the importer of goods upon customs clearance. It is a non-cumulative tax based on ad valorem rates according to the classification of the product under the Harmonised Tariff Schedule. IPI rates are established according to the degree of necessity of the product (e.g. cigarettes and alcoholic beverages are subject to higher rates). IPI credits calculated on the acquisition of inputs can be used to offset IPI due on subsequent transactions.

• Importation Tax (“II”): levied on the importer of goods upon customs clearance. It is a cumulative tax based on ad valorem rates according to the classification of the product under the Harmonised Tariff Schedule.

• Social Security Contribution (“INSS”): levied on the employer at a standard 20% rate applied on the total of employees’ remuneration indicated on the payroll.

• Severance Indemnity Fund (“FGTS”): paid by the employer on an individual employee’s account, at the rate of 8% of employee’s remuneration indicated on the payroll.

ii State Taxes:

• Value-added tax on sales and services (“ICMS”): levied on the circulation of goods and on the rendering of interstate and inter-municipal transportation services, communication services and on the supply of energy.

• Internal transactions: general rates between 17% and 19%

• Interstate transactions: rates between 4% and 12%

• This tax is also levied on imports of goods.

• Tax on Transmission of Property Causa Mortis and Donation (“ITCMD”): levied on donations and inheritances. Tax rates vary from State to State, ranging from 4% to 6%.

iii Municipal Taxes:

• Service Tax (“ISS”): levied on gross revenues deriving from services listed by the Federal Government and by the Municipalities. Tax rates vary from 2% to 5%, depending on the Municipality and type of service considered. ISS is also levied on non-resident service providers, withheld by the Brazilian paying source at the same rates (from 2% to 5%). Exports of services are ISS exempt in case their results are verified abroad (some controversy lies in the concept of ‘result of the service’).

• Immovable Property / Real Estate Transfer Tax (“ITBI”): levied on the transfer of real estate properties. Tax rates may differ from city to city, however, it usually varies between 2% and 6%.

• Tax on Urban Property (“IPTU”): levied on real estate property. Tax rates may differ from city to city, however, they usually range between 0.7% up to 2%.

iv Tax ancillary obligations:

• Brazil has an extensive list of tax ancillary obligations, including numerous tax returns and electronic frameworks. The Public Digital Bookkeeping System – SPED unifies the Brazilian taxpayer’s commercial and tax records.


BRAZIL

• Given the complexity of the Brazilian tax ancillary obligations, further guidance and detailed analysis case-by-case is recommended, in order to meet the

compliance procedures established in the tax legislation.

• The Brazilian tax authorities have a 5 year statute of limitations period to audit and assess taxpayers in the Country.

2. RECENT DEVELOPMENTSa. Brazilian Tax Reform

One of the most recent and relevant tax developments in Brazil is the formal bill presented by the Federal Government proposing a Tax Reform which would result in the overall simplification of the Brazilian tax system, especially for taxes related to the business activity of companies located in Brazil. For example, one of the primary proposals of the reform is to replace various types of taxes levied on goods and services by a single tax commonly known as value-added tax (“VAT”). It is also worth mentioning that this new Tax Reform may bring changes to the taxation of dividends for income taxes purposes, which are currently tax exempt.

In summary, there are three different proposals being analysed by the Brazilian Congress:

• Proposal for Amendment of the Federal Constitution – PEC n. 45/2019

Proposed by the Brazilian House of Representatives, simplifies the Brazilian tax system introducing a single non-cumulative tax, with uniform tax rate, applied on sales of goods and services called “IBS”, along with a selective tax (“IS”), applicable on specific products such as cigarettes.

• PEC n. 110/2019

Proposed by the Brazilian Senate, unifies a series of other law projects, introducing the Federal and State IBS tax, the IS and a specific reform related to the corporate income tax.

• PEC n. 128/2019

Proposed by the Brazilian House of Representatives and similar to PEC n. 110, including a specific reform related to the Brazilian excise tax (IPI) and introducing a new tax on financial transactions called “IMF”.

b. New CBS tax

On 21 July 2020, the Minister of Finance, Paulo Guedes, presented to the Brazilian Congress the first phase of the much anticipated tax reform proposal of the Federal Government, under Project of Law (PL) n. 3.887/2020.

In this first stage, from a total of four phases, the Government proposed the unification of social contributions (“PIS” and COFINS” in the Portuguese acronym), creating a new value added tax named ‘contribution on goods and services’, or ‘Contribuição sobre Bens e Serviços’ - CBS, at a 12% rate (5.8% for financial institutions, health insurance plans and insurance companies), with a broad credit system related to business activities. Under the current system, the PIS and COFINS contributions are levied on payroll, on import transactions and on gross revenues, being applied at different rates. The use of PIS/COFINS credits is also very complex, as well as the respective ancillary obligations. The intention of the Brazilian Government with the introduction of CBS is to simplify, streamline and give more transparency to the taxation of goods and services, for both companies and taxpayers. Upon approval, the CBS will be charged within 6 months from the conversion of the PL into law.


BRAZIL

The Project of Law also foresees the payment of CBS by digital platforms in the intermediation of operations in which the seller does not issue an electronic invoice (e.g. sales performed between individuals though the digital platform).

In addition, the new taxation system limits the number of especial regimes, reduces the volume of ancillary obligations, and exempts from CBS basic food supplies, services under the Brazilian public health system, transportation services, as well as charitable societies and churches. The cumulative regime for computation of the tax (with no use of credits and at different rates) is maintained for the oil and gas sector, and for the cigarette industry. The tax beneficial regime of the Manaus Free Trade Zone remains unaltered.

The PL n. 3.887/2020 is now heading for the analysis of the Brazilian Congress, where two other tax reform proposals are being processed, constitutional amendment proposals - “PECs” n. 45/2019 and n. 110/2019, presented by the Brazilian House of Representatives and the Federal Senate, respectively. These proposals shall be gathered in a single PEC, which approval is still pending.

c. Alignment with the BEPS initiative

Normative Instruction nº 1,846/2018, issued by the Brazilian Revenue Service, regulated the Mutual Agreement Procedure (“MAP”) under international agreements and conventions to avoid double taxation, in accordance with Action 14 of the Base Erosion and Profit Shifting – BEPS initiative proposed by the Organisation for Economic Cooperation and Development - OECD.

Further, Normative Instruction nº 1,870/2019 introduced some changes to Brazilian Transfer Pricing rules, in line with BEPS Action 10.

d. Tax measures to cope with the COVID-19 pandemic crisis

The Federal ministries of Health and Economy have quickly established a series of measures to cope with the COVID-19 crisis. The most important measures were established by Provisional Measures proposed by the Federal Government which gave legal basis to normatives provided by other organs to deal with the economic and social crisis. The measures are centered in public expenditures in key areas, such as health and education; financial aid to vulnerable populations and to small businesses; job maintenance and facilitation of credit.

3. SHARE ACQUISITIONSa. General Comments

A share acquisition implies in the acquisition of participation in a company, with the corresponding assets and liabilities.

The purchase of shares can result in capital gains taxation in Brazil, which is realised by the seller if there is a positive difference between the sales price and the sellers acquisition cost (or basis). If the seller is a legal entity, then the capital gains arising from a share sale are subject to the Brazilian corporate income tax at a combined nominal rate of 34%. However, if the gain is realised by a non-resident seller or by a resident individual seller, it is subject to income tax at a progressive rate of 15% up to 22.5%. In the case of non-resident sellers, the tax must be withheld by the Brazilian acquiror or by Brazilian acquiror or by a local representative of a non-resident acquiror, at the same progressive rates.

In addition, it is important to mention that article 95 of Normative Instruction nº 1,585/2015 provides that a capital gain realised by a non-resident on the sale of quotas of a private equity fund is subject to WHT at the rate of 0%.


BRAZIL

b. Tax Attributes

In general terms, tax losses and other tax attributes of a target company may be carried over.

Depending on how the transaction is structured, the buyer may be able to obtain a better tax result by acquiring the relevant shares, instead of acquiring the assets directly. This is because acquiring shares can result in the generation of goodwill (equal to acquisition price that is in excess of net worth and fair value of target’s assets) which can result in a tax deduction for corporate income tax purposes. The legislation establishes a set of rules to allow the tax amortisation of goodwill.

c. Tax Grouping

In Brazil, establishments or business units are generally treated as independent taxable entities for purposes of imposing indirect taxes. For corporate taxes and other financial purposes, each Brazilian legal entity (formed by its relevant establishments and business units) is considered on a stand-alone basis. Consolidated tax returns are not allowed in Brazil.

In addition, if the Brazilian entity has subsidiaries abroad, the Brazilian Controlled Foreign Corporation - CFC rules introduced by Law nº 12,973/2014 are applicable. This legislation provides for the consolidation (until 2022) of positive and negative adjustments derived from foreign subsidiaries, if certain conditions are met.

d. Tax Free Reorganisations

In general, tax free reorganisations are possible in Brazil when based on book values. However, the characterisation of reorganisations for Brazilian tax purposes is determined on a case-by-case basis, considering all the relevant facts and circumstances.

e. Purchase Agreement

There is no specific format for a share purchase agreement, other than the ordinary commercial conditions typically included in a share/asset sales agreement.

The purchase agreement cannot determine tax matters or result in any changes to the application of tax law. Any language that contradicts the applicable tax legislation will not be binding.

f. Transfer taxes on share transfers

Apart from the capital gains taxation mentioned above, there is no Brazilian transfer tax such as stamp duty, registration fee or similar levy on the transfer of shares. However, transfer of shares based on inheritances and donations are subject to the ITCMD, at rates that vary according to the State where the transfer occurs.

g. “Purchase accounting” applicable to share acquisitions

Brazil follows the international accounting standards (IFRS) and, therefore, the “purchase accounting” methodology is applicable on the acquisition of shares, in order to review the fair value of assets and liabilities of the acquired business/entity.


BRAZIL

h. Share Purchase Advantages

Certain tax exemptions are applicable with respect to the capital gains arising from a share sale in Brazil.

For individual taxpayers (residents in Brazil), net gains are exempt from income tax if the transactions performed on the Brazilian stock exchange do not exceed BRL 20 thousand per month, or if over the counter transactions (outside the Brazilian stock exchange) do not exceed BRL 35 thousand per month.

A full exemption is also applied, for individual taxpayers, on the capital gains arising from sales of specific shares issued by small and medium companies on the Brazilian stock exchange, in accordance with Law nº 13,043/2014. It is important to bear in mind that this exemption is only applicable until 2023.

i. Share Purchase Disadvantages

In Brazil, if an employee is granted a “stock option / incentive plan” by the Company, Brazilian tax authorities may potentially consider these shares as an element of the employee’s overall compensation (salary). In that case, individual income tax and social tax would apply at progressive rates up to 27.5% and 14%, respectively. If the intrinsic benefit of the share plan is considered as salary and processed through the Brazilian company’s payroll, a considerable burden of approximately 37% would apply for the local employer company.

This characterisation as salary is particularly likely if the employee receives the shares as a “bonus” and therefore does not pay for such shares and does not bear the risk of fluctuations similar to those verified in the stock market. Additionally, the share “bonus” would be treated as a fringe benefit granted by the company and subject to social security contributions and FGTS paid by the employer.

It is important to note that stock plans are a complex subject in Brazil, which has been under the scrutiny of Brazilian tax authorities. Many decisions have been issued by the Brazilian tax authorities at administrative level dealing with the taxation of stock plans. Therefore, a specific analysis, in view of actual facts and circumstances, is recommended in order to properly characterise the stock plans for Brazilian tax purposes.

4. ASSET ACQUISITIONa. General Comments

As mentioned previously, the sale of assets may generate a taxable capital gain to the seller in Brazil equal to the excess in Brazilian currency of the sales price in relation to the acquisition cost (or basis) of the assets held by the seller. The gain is subject to corporate income taxes with the corresponding combined nominal rate of 34%, for a seller that is a Brazilian legal entity.

If the capital gain is realised by a foreign investor (i.e the seller is a non-resident), or by a Brazilian resident individual seller, it is subject to income tax at progressive rates of 15% up to 22.5%, and would be collected as a withholding tax.

It is also important to note that where an investor acquires assets in Brazil which constitute a trade or business, and continues to operate such business following the acquisition, then the acquiror could be liable for potential tax contingencies related to the business / assets being acquired.


BRAZIL

b. Purchase Price Allocation

For tax purposes, the Purchase Price Allocation (“PPA”) is important because it determines the breakdown of the purchase price on the financial books, which directly impacts the CIT basis.

It is generally accepted for tax purposes that the PPA is determined in accordance with the purchase agreement and accounting regulations that are in line with the IFRS rules. The PPA would provide the portion of the purchase price that is classified as “goodwill”, subject to amortisation, which in most cases result in additional deductions for CIT purposes. As a condition for the tax deduction of the goodwill, a PPA report must be prepared by an independent expert and filed with the Brazilian Federal Revenue Service or the Registry of Deeds and Documents within 13 months. Realisation of the investment (via a merger, for example) is also a requirement to allow tax amortisation.

c. Tax Attributes

If the acquired assets constitute a going concern or establishment, the buyer may benefit from the use of tax credits and certain other tax attributes, especially those associated with indirect taxes, such as IPI and ICMS.

d. Tax Free Reorganisations

Similar to share acquisitions, tax free reorganisations are possible (resulting in the transaction being based on book values). However, such transactions must be analysed on a case-by-case basis considering all relevant facts and circumstances, in order to determine if they qualify for such beneficial tax treatment.

e. Purchase Agreement

There is no specific format for a share purchase agreement, other than the ordinary commercial conditions typically included in a share/asset sales agreement.

The purchase agreement cannot determine tax matters or result in any changes to the application of tax law. Any language that contradicts the applicable tax legislation will not be binding.

f. Depreciation and Amortisation

Currently, the legislation related to goodwill amortisation requires that the goodwill amount is provided in a PPA report and determined in accordance with the accounting criteria (Law nº 12,973/2014), which is in line with IFRS rules.

The current tax legislation determines that the price paid in local transactions (involving non-related parties) must be allocated first to the fair value of assets and liabilities, including intangibles, and the remaining portion may be allocated to deductible goodwill for tax purposes (based on future profitability).

Tax amortisation of the resulting goodwill is allowed, subject to the maximum limit of 1/60 per month. As a condition for the tax deduction of the goodwill, a PPA report must be prepared by an independent expert and filed with the Brazilian Federal Revenue Service or the Registry of Deeds and Documents within 13 months. As mentioned above, realisation of the investment (via a merger transaction, for example) is also a requirement to allow tax amortisation.

Further, if an intangible is identified in the acquisition process, and recorded on the buyer’s financial books according to the PPA, it would be subject to amortisation, observing its economic useful life.


BRAZIL

g. Transfer Taxes, VAT

Assets deals can be taxed for VAT purposes in Brazil and the recovery of relevant VAT can occur, depending on the applicable legislation, as well as on the relevant facts and circumstances.

VAT taxes can be applied at Federal or State level. At Federal level, PIS and Cofins would be applied, depending on the nature of asset that is being sold (for example, these contributions are not applied on the sale of fixed assets and intangibles).

The IPI is applicable on the transfer/sale of products manufactured or imported by the seller. The IPI paid is creditable by the purchaser.

At State level, the ICMS is also applicable on the transfer/sale of products, and the tax paid would become a credit to the purchaser.

If the transaction includes the sale of real estate, at the municipal level, the transaction would be subject to ITBI, and the buyer would be responsible for paying the tax to the Municipality.

h. Asset Purchase Advantages

Advantages of an asset acquisition include:

• The acquiror usually obtains a step-up in the book value of the assets;

• If the acquired assets constitute a going concern or establishment, the acquiror may benefit from the use of tax credits and certain other tax attributes, especially those associated with indirect taxes, such as IPI and ICMS;

i. Asset Purchase Disadvantages

Disadvantages of an asset acquisition include:

• Asset acquisitions tend to result in more burdensome taxation when compared to a share deal (especially regarding Brazilian indirect taxes – IPI, ICMS, PIS, Cofins and ITBI);

• Asset acquisitions may prevent the buyer from acquiring the target’s tax losses and other tax attributes;

• Depending on the assets or businesses being acquired, new registrations for tax, labor and other regulatory purposes may be required;

• If the assets being transferred constitute a going concern or establishment, potential tax, legal and labour contingencies related to such asset are normally transmitted to the acquiror.

5. ACQUISITION VEHICLESa. General Comments

An investment can be held in Brazil by a non-resident directly or through a vehicle company. The use of acquisition vehicles is a common practice in Brazil, but the Brazilian Federal Revenue Service has been recently increasing scrutiny of operations involving acquisition vehicles deemed to be used with the sole purpose of generating tax benefits, requiring the evidence of “business purpose” and “substantial economic activity”.


BRAZIL

b. Domestic Acquisition Vehicle

The use of a Brazilian entity to acquire a local target company in principle allows goodwill acquired in the transaction to be amortised and deducted for tax purposes. However, the amortisation of goodwill is frequently questioned by the Brazilian tax authorities, which look for the motivation of the transaction and whether it has been performed using a domestic vehicle with the sole purpose of generating tax benefits.

c. Foreign Acquisition Vehicle

A foreign vehicle could in theory be used to defer taxation of the ultimate investor in case capital gain is potentially assessed. However, the Brazilian tax authorities can question this type of transaction, in order to investigate the actual purchaser and seller of the investment. If they understand that the transaction lacks economic substance, capital gains taxation may apply in Brazil.

d. Strategic vs Private Equity Buyers

The use of partnerships and joint ventures as acquisition vehicles is generally allowed in Brazil.

Acquisition vehicles are a complex subject in Brazil that demands a detailed analysis and evaluation of actual facts and circumstances, from different angles and with adequate support.

6. ACQUISITION FINANCINGa. General Comments

Financing for acquisitions in Brazil can be carried out via a capital contribution and/or through debt. The foreign capital invested in the country must be registered with the Brazilian Central Bank - BACEN, according to Law nº 4,131/1962.

The remittance of funds to Brazil is commonly performed via bank wire transfers.

b. Equity

Brazilian tax rules do not provide for a specific tax treatment in relation to private equity financed transactions. However, Brazilian legal entities can opt for a deductible instrument named Interest on Net Equity (INE) to remunerate shareholders for the capital invested in companies. INE is calculated by reference to the net equity accounts, considering the official Brazilian long-term interest rate.

The upper limit on interest on net equity is determined as the higher of: (i) 50% of the net income for the year, before deduction of the interest on net equity and deduction of the provision for corporate income tax, but after the deduction of the social contribution on net income, and (ii) 50% of retained earnings plus profit reserves.

Although INE payments are considered as a deductible expense for CIT calculation purposes, the Brazilian tax law imposes the withholding income tax (WHT) at a standard 15% rate (increased to 25% in case of tax haven jurisdictions for Brazilian tax purposes), for both residents and non-residents.


BRAZIL

c. Debt

In general terms, the Brazilian legislation does not impose limitations on the use of debt, and the deduction of interest expenses arising from debt facilities with non-related parties is allowed, as long as the transaction is carried out at normal market conditions and such expenses are considered ordinary and necessary for the business activities of the borrower. However, the Brazilian legislation establishes requirements for the deductibility of interest expenses arising from debt operations with related parties, or lenders located in low-tax jurisdictions or under privileged tax regimes.

Further, there are thin capitalisation rules in Brazil which must be considered. For interest deductibility purposes, the debt cannot be higher than: (i) two times the amount of the participation held by the foreign lender in the net equity of the Brazilian entity; (ii) two times the net equity of the Brazilian entity (when the non-resident lender does not have participation in the latter); and (iii) 30 percent of the net equity of the borrower if the lender is located in a low-tax jurisdiction or under a privileged tax regime (whether it is a related party or not). These rules also apply to any kind of debt operation where a foreign related party acts as guarantor, co-signer or intervening party of the debt contract.

Finally, Brazilian Transfer Pricing rules apply on loan transactions, setting forth certain limits regarding the deductibility of interest expenses arising from debt operations with related parties.

i Debt Pushdowns

Where the acquiror intends to push-down the debt used to finance an acquisition, a Brazilian vehicle or holding company are generally used to act as borrower. Following the purchase, this legal entity is typically merged into the acquired operational legal entity.

Other structures may involve (i) back-to-back loans on the same terms and conditions, or (ii) obtaining a new loan at the level of the acquired company, so that it can pay off the original loan. These structures may be feasible if the entire capital stock of the legal entity is acquired. Other structures may also be feasible, but should be subject to a case-by-case analysis.

Lastly, it is important to note that Brazil has not implemented BEPS Action 4, which deals with interest and debt.

d. Hybrid Instruments

Hybrid instruments are instruments that can be classified as either debt or equity, as well as instruments that have different natures in different jurisdictions.

In Brazil, the INE is an example of “hybrid instrument” which, as stated above, consists of a deduction available to legal entities for remunerating shareholders on the capital invested, according to the Brazilian long-term interest rate (TJLP), and considering the limits imposed by the Brazilian legislation in force.

e. Other Instruments

Shareholders can also be remunerated by means of dividend distributions, which are currently exempt from WHT. However, as mentioned above, the proposed bill of Tax Reform under the analysis of the Brazilian Congress resumes the taxation of dividends (CIT and WHT).

f. Earn-outs

Earn-outs are quite common in M&A transactions in Brazil. However, because they are treated as installments conditioned to a future event, the amount of the earn-out can impact the capital gains calculation and the potential goodwill generated on the transaction, which ultimately impacts the amount of corporate income tax to be assessed.


BRAZIL

7. DIVESTITURESAs discussed above, the sale of assets or shares may potentially generate a capital gain taxable to the seller, equal to the excess in Brazilian currency of the sales price in relation to the acquisition cost (or basis) of the disposed shares or assets in the hands of the seller.

When the capital gain is realised by a Brazilian legal entity, it is subject to CIT at a combined nominal rate of 34%. When the capital gain is realised by a Brazilian tax resident individual or non-resident investor, the capital gain is subject to progressive rates ranging from 15% to 22.5%, or 25% if they are resident or domiciled in a tax haven jurisdiction.

It is important to emphasise that the method for determination of the acquisition cost basis of a non-resident investor or tax resident individual is not completely clear, being subject to different interpretations.

8. FOREIGN OPERATIONS OF A DOMESTIC TARGETa. Worldwide or territorial tax system

Brazil follows a worldwide tax system and, therefore, income earned abroad is taxed for CIT purposes. Income, profits and gains earned by foreign subsidiaries are taxed in Brazil on an accrual basis and included on the income tax tax return.

b. CFC Regime

The Brazilian CFC rules are set forth in Law nº 12,973/2014 and are considered quite complex. Such rules provide that Brazilian entities that earn income abroad (except income deriving from exportation of goods and services), are subject to CIT under the “Actual Profits” regime (i.e profits of directly or indirectly controlled foreign companies and branches of a Brazilian entity are taxed in Brazil). Such taxation is applied at the combined income tax rate of 34% on profits earned abroad every December 31st of the calendar year in which they were recorded.

Losses may be offset only against the profits earned by the same subsidiary or branch located abroad.

c. Foreign branches and partnerships

Foreign branches and partnerships receive the same tax treatment as other Brazilian subsidiaries entities abroad (affiliates and controlled).

d. Cash Repatriation

There are various ways of cash repatriation, summarised as follows:

• Dividends: currently the remittance of dividends is exempt from WHT, unless paid to an entity established in a tax haven jurisdiction or country with privileged regime;

• Capital reduction: a capital reduction may not generate capital gain if it is smaller than the acquisition cost registered with BACEN (Brazilian Central Bank) considering the historical amounts invested in Brazilian currency. However, if there is a positive difference between the capital reduction and the acquisition cost, a capital gain would be triggered and subject to CIT at progressive rates of 15% to 22.5%.


BRAZIL

• Interest on Net Equity (INE): the remittance of INE abroad is subject to WHT at the rate of 15% and the expense is considered as a deductible cost in the Brazilian entity;

• Interest: the remittance of interest abroad is subject to WHT at the rate of 15%, or 25% if the recipient is resident in a tax haven jurisdiction;

• Services and royalties: as a general rule, remittances abroad for services and royalties are subject to WHT at the rate of 15% (25% if the receiver is resident in a tax haven jurisdiction). However, depending on the nature of services and other circumstances, the tax rate may be reduced under a double tax treaty.

9. OTHER GENERAL INTERNATIONAL TAX CONSIDERATIONSa. Special Rules for Real Property, including Shares of “Real Property-Rich” Corporations

The Brazilian legislation created the so called “segregate estate” to separate the assets of a real estate developer from the property that has been used for a specific purpose, in order to protect investors in real property. Once the segregate estate is formed, the assets, rights and obligations which constitute the estate, even though they formally belong to the patrimony of an individual or legal entity, remain legally separate from the latter, receiving a different legal treatment.

The domestic tax legislation also provides for a special tax regime applicable to real estate developers, in which the corporate member (developer) is subject to a payment equivalent to 4% of the monthly revenues received (Law nº 12,844/2013), which corresponds to an unified monthly payment of the following federal taxes and contributions: IRPJ, CSLL, PIS and COFINS.

The unified payment of taxes is final and does not give the right of refund or compensation. Each entity subject to the special regime has its own unified collection.

Additionally, it is important to mention that companies whose main activities involve the purchase and sale of real estate properties are subject to the ITBI. As mentioned before, this is a municipal tax levied on the acquisition of real estate. The rate varies between 2% and 6%, and is calculated based on the market value of the property or its appraised value, whichever is higher.

b. CbC and Other Reporting Regimes

Brazil has adopted the Country-by-Country (“CbC”) Report from BEPS Action 13, through Normative Instruction nº 1,681/2016.

In summary, the Brazilian legislation sets forth that the CbC report should be filed with the corporate income tax report, on an annual basis, being mandatory for the parent entity of a multinational group.

10. TRANSFER PRICINGBrazilian Transfer Pricing rules generally follow the arm’s length principle in the sense that they are aimed at determining prices for associated enterprises to which independent parties would have agreed had they engaged in similar transactions.

However, whereas the OECD Transfer Pricing Guidelines provide for a functional and comparative analysis, in order to achieve independent prices, Brazilian Transfer Pricing rules rely mostly on fixed markup rates which are explicitly prescribed in the legislation.


BRAZIL

The Brazilian Transfer Pricing rules were enacted on 27 December 1996, through Laws 9,430 and 9,959/2000 (generally applicable to all calendar years before 2013), as well as Laws 12,715/2012 and 12,766/2012 (generally applicable to all calendar years starting on or after 1 January 2013), and also Normative Rulings issued by the RFB. The Brazilian Transfer Pricing legislation stipulates the maximum deductible amounts on the import of goods, services or rights and the minimum export prices for goods, services or rights to related parties.

On imports, the Transfer Pricing rules provide the maximum amount that is tax deductible for corporate income taxation purposes. The difference between the effective price of the transaction and the transfer price will be considered non-deductible for Brazilian corporate income tax purposes, regardless of the criteria adopted by the Brazilian company.

For Brazilian tax purposes, an expense is considered deductible if it is related to the ordinary business of the company and if it is deemed necessary to maintain the source of income of the entity. As of 2010, the scope of expenses not related to the ordinary business of the company was extended to include interest on debts whose amounts do not comply with a debt/equity ratio of 2:1, or 1:0.3, when paid to related parties abroad or parties located in tax-haven jurisdictions or privileged tax regimes.

There are four calculation methods for imports and five methods for exports concerning commercial and service transactions. The import methods are: (i) PIC (comparable uncontrolled price method); (ii) PRL (resale price less markup); (iii) CPL (production cost plus markup); and (iv) PCI (quoted price for imports). PCI is used only for commodity transactions.

The export methods are: (i) PVEx (sale price for exports method); (ii) PVA (wholesale sales price in the destination country, less profits method); (iii) PVV (retail sales price in the destination country, less profits method); (iv) CAP (cost of acquisition or production, plus taxes and profits method); and (v) PECEX (quoted price for exports).

Lastly, compliance with these rules is very important, since tax authorities are very active and tend to question the transfer pricing calculations performed by Brazilian taxpayers if they are not in line with applicable rules, or if the supporting documentation is unreliable.

11. POST-ACQUISITION INTEGRATION CONSIDERATIONSa. Use of Hybrid Entities and Instruments

There is no Brazilian legislation dealing with hybrid entities or consideration of hybrid instruments in post-acquisition integration.

b. Principal/Limited Risk Distribution or Similar Structures

There is no specific legislation for principal or limited risk distribution. See above the discussion regarding the Brazilian Transfer Pricing rules.

c. Intellectual Property

The Brazilian legislation does not provide specific rules on the licensing of intellectual property. However, there are specific local rules regarding the rights and obligations related to intellectual and industrial properties, as well as the requirement of proper documentation formalising the registry of intangible property with the Brazilian National Institute of Industry Property (INPI).


BRAZIL

The remittance of royalties to a beneficiary abroad is generally subject to WHT at the standard rate of 15% (25% for entities established in tax haven jurisdictions) and to the CIDE, at the rate of 10% (please refer to our detailed comments above regarding these taxes). IOF is also applied on the remittance of the royalty funds abroad.

Since the Brazilian Transfer Pricing rules do not follow the international standards adopted by OECD Guidelines, the remittance of royalties abroad is not subject to such rules, having a specific deductibility methodology for CIT purposes.

In this regard, if the royalties are considered as a necessary and ordinary expense for the Brazilian entity, they may be deducted for CIT purposes, subject to a limit varying from 1% up to 5% on net revenue (directly linked with the patent, technology or technical assistance), according to the royalties’ nature and the applicable legislation. Royalties exceeding these thresholds are not considered a deductible expense in the CIT calculation basis.

d. Special Tax Regimes

Many incentives and special tax regimes are provided by Brazilian Federal and State tax legislation. It is worth mentioning the following tax incentives:

• The “R&D tax incentive” consists of a volume-based R&D tax allowance, in which 60% to 80% of expenses related to research and development of technology are considered deductible for CIT purposes, depending on certain circumstances.

• This deduction affects the CIT calculation basis, at the combined nominal rate of 34%. It is important to bear in mind that in case of insufficient tax liability, unused claims cannot be refunded or carried forward.

• The “Manaus Free Trade Zone (ZFM)” provides a set of tax benefits on imports and local sourcing of inputs used in industrial facilities located in this region. The applicable legislation states different tax reductions and exemptions on many taxes (II, IPI, IRPJ, CSLL, ICMS, PIS and COFINS).

• The “REIDI” is a special tax regime for infrastructure projects. Under REIDI regime the acquisition, import and leasing of goods and services applied to such projects are suspended for PIS and COFINS (taxes on gross income) purposes. Also, interest paid in relation to debentures issued to finance infrastructure projects may benefit from a WHT reduction.

12. OECD CONSIDERATIONSBrazil is engaged in the OECD discussions, however few directives from the BEPS initiative have been formally adopted in the Brazilian tax legislation – e.g. a formal indication of compliance with BEPS Action 5 in the reasoning for the issuance of Normative Instruction 1,634/2016 (and subsequent amendments), regarding the disclosure of beneficial ownership.

Further, in accordance with BEPS Action 13, in October 2016 Brazil has signed the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (“CbC MCAA”), and in December 2016, the Brazilian Revenue Service has published Normative Instruction 1,681/2016 to implement the annual country-by-country (“CbC”) reporting in Brazil, as of calendar year 2016.

Brazil has taken some measures to implement BEPS Action 6, such as the adjustments to the Protocol of the Double Tax Treaty signed with Argentina, to include the limitation-on-benefits (LOB) and anti-avoidance clauses. Besides that, the tax treaties recently signed with Switzerland and Singapore (not yet in force in Brazil), already contain LOB and anti-avoidance clauses.


BRAZIL

The domestic legislation, especially Law n. 12.249/2010 and Normative Instruction n. 1.154/2011 issued by the Brazilian Revenue Service, which set forth thin capitalisation rules in Brazil, are already in accordance with BEPS Action 4. The comments made with respect to BEPS Action 4 are applicable to BEPS Action 3, due to the fact that the Brazilian Law n. 12.973/2014 addressed the relevant issues regarding controlled foreign corporation rules (CFC).

As mentioned previously, Brazil does not follow OECD Transfer Pricing Guidelines and apply a specific set of rules stated in Law n. 9.430/1996.

In relation to BEPS Action 14, Brazil has regulated the Mutual Agreement Procedure (MAP) through Normative Instruction n. 1.846/2018. In addition, Brazil has already used similar clauses in some of its double tax treaties. Regarding BEPS Action 15, Brazil participated in the ad hoc Group for the development of the multilateral instrument, but the expected timing for its implementation is yet unknown.

Finally, it is important to note that Brazil has applied back in May, 2017 for becoming a member of the Organisation for Economic Co-operation and Development (OECD). The process is still ongoing with no specific timeline for conclusion.

13. ACCOUNTING CONSIDERATIONSa. Combinations

As discussed above, Law nº 11,638/2007 modified relevant aspects of Law nº 6,404/1976 in order to align the Brazilian GAAP with the international standards set forth by IFRS.

Accordingly, the Brazilian rules are consistent with international accounting standards. The business combination accounting rules set forth in IFRS 3 are in line with the corresponding CPC 15 in Brazil.

b. Divestitures

The same considerations mentioned above apply to divestitures.

14. OTHER TAX CONSIDERATIONSa. Distributable Reserves

As discussed above, Brazilian entities can distribute dividends based on the existence of profits accrued on net equity, and interest on net equity (INE) can be distributed considering the existence of accumulated profits or profits accrued during the calendar year, observing the related requirements set forth in the Brazilian tax legislation.

b. Substance Requirements for Recipients

There is no formal Brazilian legislation defining a “substance requirement” for recipients. However, as mentioned previously, tax authorities usually analyse certain aspects, such as: (i) whether payments are made to a non-resident company located in a tax haven jurisdiction (black listed). or in countries with privileged fiscal regimes; and (ii) the existence of economic substance.


BRAZIL

This “economic substance” concept can be understood as the analysis on whether the holding company is deemed to have “substantial economic activity”, presenting in its country of residency an operational capacity suitable to its purpose. This can be evidenced, among other factors, by the existence of skilled employees in sufficient number and adequate facilities for management and effective decision-making relating to: (i) the development of activities aimed at obtaining income derived from the company’s assets, and (ii) the management of the equity stake aimed at obtaining income from the distribution of dividends and capital gains.

c. Application of Regional Rules

According to the above mentioned topic relating to OECD Aspects (item XII), Brazil has already implemented a few rules in relation to BEPS Actions (CFC rules, thin capitalisation rules, and avoidance of base erosion and profit shifting, among others).

It is worth mentioning the Brazilian efforts to implement treaty anti-abuse measures, through modifications in an existing tax treaty network and adoption of current practices regarding the negotiation of new treaties (inclusion of limitation-on-benefits – LOB and anti-avoidance clauses).

d. Tax Rulings and Clearances

Tax rulings are important in Brazil, since they are binding and broadly followed by taxpayers and tax authorities. However, rulings cannot innovate in tax matters, creating new rules, but are limited to clarify and specify the rules already contained in the Brazilian legislation.

15. MAJOR NON-TAX CONSIDERATIONSLaw 4.131/1962 is the basic legislation concerning the regulation of foreign capital exchange. It applies to any capital that entered the country in the form of foreign currency, goods and services.

According to the Brazilian legislation, foreign capital in Brazil must be registered with the Brazilian Central Bank - BACEN, at the electronic declaratory register / foreign investment module – “RDE-IED”. Brazilian capital and other assets held abroad must also be declared to the BACEN on an annual basis. Other transactions that must be declared in the BACEN system are: financial operations such as loans, long-term import financing, technical assistance and royalty contracts, and

portfolio investment.


BRAZIL

16. APPENDIX I - TAX TREATY RATESProfits and dividends distributed to resident or non-resident beneficiaries (individuals and/or legal entities) are generally not subject to WHT (please refer to our comment above regarding the Tax Reform bill under analysis of the Brazilian Congress, which includes a proposal to resume taxation of dividends).

As mentioned previously, the WHT rate applicable on remittances abroad for services, royalties and interest rendered by non-resident companies or individuals is generally 15%, levied on the amount paid, credited, used or remitted abroad. If payments are made to a non-resident company located in a tax haven jurisdiction (black listed) or in countries with privileged fiscal regimes (grey listed), then the amount is subject to WHT at the rate of 25%.

The WHT rate can be reduced with the application of certain double tax treaties signed between Brazil and other countries (to be analysed on a case-by-case basis).

The Brazil Double Tax Treaty network in force includes the following countries:

Argentina Czech Republic India Mexico Russia Turkey

Austria Denmark Israel Netherlands Slovak Republic Ukraine

Belgium Ecuador Italy Norway South Africa Venezuela

Canada Finland Japan Peru Spain

Chile France Korea, Republic of Philippines Sweden

China, People’s Republic

Hungary Luxembourg Portugal Trinidad and Tobago

There are four other DTTs signed between Brazil and Switzerland, Uruguay, Singapore and United Arab Emirates, which are not yet in force in Brazil.


BRAZIL

Jurisdiction Dividends % [1] Interest % [2] Royalties % [3] Footnote Reference

Argentina 0 15 10 / 15

Austria 15 15 10 / 15 / 25 [4]

Belgium 10 / 15 10 / 15 10 / 15 / 20

Canada 15 10 / 15 15 / 25

Chile 10 / 15 15 15

People's Republic of China 15 15 15 / 25

Czech Republic 15 10 / 15 15 / 25

Denmark 25 15 15 / 25

Ecuador 15 15 15 / 25

Finland 10 15 10 / 15 / 25 [4]

France 15 10 / 15 10 / 15 / 25 [4]

Hungary 15 10 / 15 15 / 25

India 15 15 15 / 25

Israel 10 / 15 15 10 / 15

Italy 15 15 15 / 25

Japan 12.5 12.5 12.5 / 15 / 25 [4]

Republic of Korea 10 / 15 10 / 15 10 / 15 / 25

Luxembourg 15 / 25 10 / 15 15 / 25

Mexico 10 / 15 15 10 / 15

Netherlands 15 10 / 15 15 / 25

Norway 15 15 15 / 25

Peru 10 / 15 15 15

Philippines 15 / 25 10 / 15 15 / 25


BRAZIL

Jurisdiction Dividends % [1] Interest % [2] Royalties % [3] Footnote Reference

Portugal 10 / 15 15 15

Russia 10 / 15 15 15

Slovak Republic 15 10 / 15 15 / 25

South Africa 10 / 15 15 10 / 15

Spain 10 / 15 10 / 15 10 / 15

Sweden 25 25 25 [4]

Trinidad and Tobago 10 / 15 15 15

Turkey 10 / 15 15 10 / 15

Ukraine 10 / 15 15 15

Venezuela 10 / 15 15 15


BRAZIL

Footnotes:

1

Dividends - The remittance of dividends from Brazil to abroad is currently not subject to taxation in Brazil, so the tax rate limitation indicated above is not considered. Please note that a proposal of tax reform under analysis of the Brazilian Congress may re-introduce the taxation of dividends in Brazil. In this case, the tax rate limination provided by the DTTs shall become relevant for discussion. The Double Tax Treaties (DTTs) signed between Brazil and other countries generally apply a 10% or 15% rate if the beneficial owner of the funds is a company that directly holds a given minimum participation in the company that pays the dividends. For all other cases a 15% or 25% rate would apply.

2Interest - Most treaties consider the general rate of 15% for interest payments, while a 10% rate is considered for specific loans (e.g. acquisition of capital goods with minimum paying term).

3

Royalties - Most DTTs signed between Brazil and other countries limit to 10% the payment of royalties related to the use / right to use cinematographic films, films or tapes for television or radio broadcasting, and any copyright of literary, artistic, or scientific work produced by a resident of a contracting state. Royalties related to the use / right to use trademarks are generally subject to a 25% (or 15%) rate. The general 15% (sometimes 10%) is applied for other types of royalties.

4

Currently, the only DTTs signed with Brazil that do not characterize technical services/assistance under the royalties article are: Brazil/Finland DTT, Brazil/Austria DTT, Brazil/France DTT, Brazil/Japan DTT, and Brazil/Sweden DTT. This last one was reviewed and the new Protocol, when it enters into force, will treat technical services/ assistance under the royalty article. The referred treaties support the understanding that withholding income tax (WHT) would not apply on service payments made from a Brazilian source, where no permanent establishment of the foreign beneficiary is indentified in Brazil (subject to a specific analysis on a case-by-case basis).

Brazil has recently signed DTTs with Switzerland, Singapore, Uruguai and Paraguay, however these treaties are not yet valid in Brazil. There is no specific timeline for the treaties to become into force. Remittances to other non-treaty jurisdictions generally have a WHT rate limited to 15%.

Remittances made to tax haven jurisdictions (as per the list provided by the Brazilian tax authorities) have a WHT rate increased to 25%.


BRAZIL

17. APPENDIX II - GENERAL CORPORATE ENTITY TAX DUE DILIGENCE REQUESTSIn other to incorporate and acquire a corporation or any other type of legal entity in Brazil, foreign shareholders must appoint an attorney-in-fact resident in Brazil, through the issuance of a power of attorney, duly apostilled in the foreign country and translated by a sworn translator registered by the Brazilian Board of Trade. This is the main relevant documentation that a foreign shareholder should provide in order to acquire or incorporate a Brazilian Limitada or S/A.

The Brazilian tax authorities have a 5 year statute of limitations period to audit and assess taxpayers in the Country.

No. Category Sub-Category Description of Request

1 Tax Due Diligence General Tax contact person available to discuss income and non-income tax matters.

2 Tax Due Diligence GeneralA current organization chart, including all entities by full legal name, jurisdiction, date and place of formation, entity type, class of shares, and ownership percentages. Include a full history of each entity in the structure.

3 Tax Due Diligence GeneralA summary of all audits (including status) for any tax, including federal, state, and local. Provide all significant audit correspondence.

4 Tax Due Diligence Financial Statement Balance sheet and P&L, for the past 5 years and on a monthly basis, when applicable.

5 Tax Due DiligenceCorporate Income Tax (IRPJ and CSLL)

Tax calculation–Corporate Income Taxes calculation spreadsheet, for the past 5 years and on a monthly basis, when applicable.


DIPJ / ECF–Income tax return (DIPJ) or Digital Accounting and Fiscal Register (ECF) (.txt file), for the past 5 years and on a monthly basis, when applicable.


Transfer pricing–Transfer pricing control, for the past 5 years and on a monthly basis, when applicable.


Royalties contracts, for the past 5 years and on a monthly basis, when applicable.


IRPJ and CSLL payments receipts for the past 5 years and on a monthly basis

10 Tax Due DiligenceFederal VAT (PIS and Cofins)

EFD-Contribuições–EFD- Contribuições, for the past 5 years and on a monthly basis, when applicable.


Withholding taxes–Withholding statement of IR, CSL, PIS e COFINS, for the past 5 years and on a monthly basis, when applicable.


Declaration of Federal Tax Credits and Debits (DCTF), for the past 5 years and on a monthly basis, when applicable.


PIS and Cofins payments receipts for the past 5 years and on a monthly basis

14 Tax Due Diligence State VAT (ICMS)ICMS and IPI–SPED/Sintegra–Electronic files from SINTEGRA or SPED Fiscal (.txt file), for the past 5 years and on a monthly basis, when applicable


BRAZIL

No. Category Sub-Category Description of Request

15 Tax Due Diligence State VAT (ICMS)CFOP summary–Input and output transactions summary of the company, for the past 5 years and on a monthly basis, when applicable

16 Tax Due Diligence State VAT (ICMS) ICMS payments receipts for the past 5 years and on a monthly basis

17 Tax Due Diligence Municipal VAT (ISS)Tax book of services' invoice–Tax book to register all services provided, for the past 5 years and on a monthly basis, when applicable

18 Tax Due Diligence Municipal VAT (ISS)Payment receipt–ISS payment receipt for each month, for the past 5 years and on a montlhly basis, when applicable

19 Tax Due Diligence Tax LitigationUpdated certificates issued by the relevant offices of the Federal, State and Labor courts in the locations where the Company has facilities and offices, in the name of the Company and of its shareholders.

20 Tax Due Diligence Tax LitigationClearance certificates in connection with federal, state and municipal taxes and contributions, in the name of the Company and covering all its establishments.

21 Tax Due Diligence Tax LitigationComplete information (date, parties, purpose, count, status, chances of success etc.) concerning pending tax administrative proceedings in which the Company is either plaintiff or defendant, including copies of relevant documents and petitions.

22 Tax Due Diligence Tax LitigationComplete information regarding notices, notifications, inspections or investigations made by governmental departments or third parties.

23 Tax Due Diligence Tax LitigationDetailed report (date, parties, purpose, count, status, chances of success etc.) on the judicial tax cases in which the Company is either plaintiff or defendant, including copies of relevant documents and petitions.

24 Tax Due Diligence Tax LitigationCopy(ies) of the tax settlement(s) requested by the Company, either regarding federal, estate or municipal taxes (e.g. REFIS), if any.

25 Tax Due Diligence Labor List of employees and the corresponding remuneration for the past five years.

26 Tax Due Diligence Labor Payment receipt–INSS and FGTS payment receipt for each month


BRAZIL

FOR MORE INFORMATION CONTACT:

Cassius Carvalho+55 11 4314 [email protected]


BRAZIL

mailto:[email protected]